The road leading to the IPO (Initial Public Offering) of the National Stock Exchange (NSE) is getting de-clogged. The barriers and obstacles are slowly, but surely, disappearing. A few days ago, Tuhin Kanta Pandey, the head of market regulator, SEBI, reiterated that the IPO, which has been hanging in the dark night environment since 2016, will surely see the light of the day. When asked if the public issue will be launched during his tenure, he jokingly and sarcastically remarked, only if you do not want me to have a short one. There are other signs that the mists over the listing are lifting.
Several issues have bogged down the IPO over the past several years. In the recent past, legal hurdles have mounted, as the NSE was accused of several wrongdoings, which included scams and scandals. The colocation and dark fibre settlement case with SEBI has affected the IPO’s future in myriad ways. Unless this reaches a conclusion, there will be no listing. In the past, NSE paid a part-amount. But its Q2-FY26 results indicate that there is an earnestness to settle the unsavoury business, and get on with the IPO. The Exchange wishes to get on with things, whatever may be the cost, if it is reasonable.
In Q2-FY26, NSE’s financials were “dented” by a one-time provision of Rs 1,300 crore, which was highlighted as the possible payment for the colocation and dark fibre case. Experts feel that this opens the way for the IPO in the future, as it removes a major legal roadblock. Thanks to the provision, the Exchange’s net profit declined by 23 per cent on Year-on-Year (YoY) basis to just over Rs2,000 crore. Thus, FY26 may emerge as the “reset” year before the “much-anticipated IPO and Dalal Street debut.” Possibly, SEBI’s Pandey was aware of these developments when he made the recent comment about the IPO, just a few days before the quarterly results were announced.
The Q2 results indicated that the Exchange’s earnings were getting stabilised due to SEBI’s recent changes in the futures and options trading. In the recent past, the regulator tightened the norms, especially when the evidence proved that the majority of the retail investors lost huge sums in the derivatives business. NSE’s quarterly operating revenue fell by 18 per cent YoY to nearly Rs 3,800 crore, which was “driven by lower trading volumes in equity cash, futures, and options segment.” Transaction charge, which accounts for two-thirds of the income, dropped by a higher 22 per cent, which hinted at a moderation in the average daily turnovers.
SEBI earlier had a “clearing corporation issue.” A media report stated that in November 2024, the regulator stated that there was a need to reduce the exchanges’ control over the clearing corporations, as the former held majority stakes in the latter. There was a conflict of interest between the two, which would impact NSE’s IPO. SEBI’s idea was to initially reduce the exchange’s stake to 51 per cent, and later to below 15 per cent. Pandey concluded that it was not feasible to demerge the clearing corporations from the parent exchanges, and a working group will look at funding issues of the corporations.
Clearly, three of the major issues that the stalled NSE’s IPO faced have been, or are being, cleared. Hence, the public issue seems to be back on track. This may be the opportune time for it as the Indian stock markets are in the grip of an IPO craze, with both large Indian and foreign companies vying to raise tens of thousands of crores of rupees from the investors. In addition, as Pandey said earlier, SEBI has no problem with the exchange’s IPO since the Bombay Stock Exchange is a listed entity. There are no policy or ideological hurdles.
Since this article delves into the subject of IPO, Pandey made another crucial announcement in the recent past. He categorically said that the regulator would not interfere with IPO valuations. In the recent past, two IPOs were embroiled in controversies over high offer prices, which might sting the investors later. Several public issues, which listed at higher-than-offer prices, lost out over the next several weeks, and quoted at discounts. While institutions and anchor investors can absorb such losses, retail, and small investors, who decide not to profit from listing gains, are saddled with losses.
“SEBI always thinks of transparency. We do not determine valuations, and it remains in the ‘eyes of the beholder,’ and the investor. We cannot intervene in the markets… and decide what would be the price of shares of a company. Share prices will be decided by the markets, depending on the opportunities,” he explained. The stock market needs to freely decide valuations, and offer prices, and the regulator’s focus is to ensure that the investors have access to “accurate and comprehensive information.” Hence, risk factors are important, and SEBI even nudges the companies to use the ‘right’ font sizes in the IPO prospectuses.
Obviously, SEBI does not wish to go back to pre-reforms days of the Controller of Capital Issues (CCI), which was the nodal agency that decided how much money a company can raise, when, and at what price. This was the period of socialist control, when the Government needed to keep a tab on companies, as well as decide their directions and paths. Post-reforms, with matured markets and exchanges, as also the huge inflows from foreign and retail investors (via mutual funds), the days of, and need for CCI is over, and gone. SEBI needs to be distinct and different from the CCI in this century.
The role of the regulator, and regulations, as defined by Pandey in his previous statements, is to “play a constructive role for market development, but if the regulations become too constraining, too overreaching, and too micromanaging, they may become problematic.” Hence, it is imperative to maintain a balanced and progressive framework, which fosters trust and growth. For example, the recent regulations propelled the growth of the mutual funds, and the number of retail investors has grown multiple times. More than 250 million folios (not new investors) were added in the recent past, with many women and investors from the smaller cities and towns.
In essence, while NSE grapples with its IPO, which is stuck for almost a decade for several reasons, and tries to brush away the regulatory and legal cobwebs, there are concerns with other IPOs. In the first case, SEBI had adopted a completely hands-on approach to straighten the issues. In the second, it wishes to keep its hands off, and let the market decide what is right and wrong. This Janus-faced image of a regulator is both soothing and comforting, as well as jarring and edgy. Maybe, SEBI will reconcile the two.
